Section 8 Company

Section 8 Company Registration: A Step by Step Guide

According to Section 8, that a person or an association of persons who propose to register themselves as a limited company with an objective of promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or with any other objective, who to apply its profits for the promotion of the purposes mentioned above, and who intends to prohibit the payments of any dividend to its members.

The Central Government being satisfied may bring the company as a limited but without the addition of the word limited and private limited at the end. But the company enjoying the benefits and also the obligations as of limited company.

Purpose of Section 8 Company

The purpose of Section 8 is to have one uniform law across the country as given under the Companies Act, 2013^[1]. It is the Companies Act that regulates the formation, management, and accountability of Section 8 under the Companies Act, making it more closely controlled and monitored trust and societies recognized all over the world.

Eligibility Criterion under Section 8 as follows:

The following conditions must be fulfilled:-

1. Intention for formation/ Objective

The intention of the creation of Section NGO/NPO is to promote activities s mentioned in it.

2. No profit-sharing

No sharing of profits between the directors and members in the association directly or indirectly.

3. No cash benefits

Members cannot draw any compensation in any cash or kind.

4. Members

There must be two directors in case it is a Private Limited Company. There must be 3 Directors in case it is a Public Limited Company.

5. Indian Resident

According to section 149(3), there must be at least 1 Indian Resident who must have stayed in India for a period of 182 days.

6. Subscribers to MOA

If the company is a public or private company registered, its MOA must have 2-3 subscribers.

7. Initial Capital

Whatever the amount has been proposed to be invested by the company must be funded within 2 months to the company.

8. Surplus

The surplus created must be for the purpose of only to meet the objectives of Section 8.

9. Winding-up

Section 8 Companies can only be wound by the specific procedure of the bye-laws of the society. After paying the debts and liabilities, the funds and properties of the company are not to be distributed among the members of the company. While the funds to be transferred to some other Section 8 Company that has these similar objectives.

10. DIN Number and DSC

All the directors must have the Director Identification Number and Digital Signature Certificate.

11. Compliances

There has to be an annual filing of returns and accounts and statements of the company with the ROC.

12.Property Management

The property of Section 8 can be sold only according to the Companies Act 2013. The Act is particular about the sale with the consent of all the directors.

Changes introduced for the incorporation under Section 8;

1. Offline forms are replaced with web forms
2. Step process has been introduced
3. Licensing and incorporation goes together
4. No need to file INC-12.

Read our article:NGO & Section 8 Registration in Delhi

Registration Process under Section 8

The incorporation norms/ Registration of Section 8 companies have been amended via 6th Amendment Rules on 7th June 2019. The current rules have made the registration in Section 8 easier. The new rules have completed the registration under Section 8 through a single form in SPICe.

Steps of Incorporation

A. Collection of required documents

1. Application- DSC (Digital Signature Certificate) is required
   a. With a Photo Id, which could be PAN ID/ AADHAR CARD
   b. Address Proof
   c. Photo of the applicant
2. Name availability documents required
   a. The proposed name must use the word such as Foundation, Association, is compulsory
   b. Complete main objects of the company
3. SPICe Form- primary documents required for the application of Incorporation Certificate
   a. Memorandum of Association
   b. Article of Association
   c. PAN Card of the subscribers to the MOA (1ST Directors of the Company)
   d. ID Proof and address to the subscribers to the MOA
   e. Registered office- notarized rent agreements
   f. Non- Objection Certificate from the owner to use the premises
   g. Declaration signed by the Directors, under the form INC-15
   h. Declaration signed by the Chartered Accountant under form INC -14
   i. Income and Expenditure of 3 years in detail to be submitted
4. Forms to be Attached-
   a. Opening of the bank account and sharing the details of the bank
   b. Signature of EPFO
   c. NOC of the opening Bank Account
   d. Authorized Signatory for GSTIN

B. Incorporating the Section 8 Company

1. Checking the name availability under the RUN
2. Login at the MCA Website
3. Fill the form online and fill the detailed object clause online and submit thereby.
4. The availability of the name is only for 20 days, and once the name is approved, SPICe needs to be submitted within 20 days after the name approval

C. Filling of the SPICe Form

1. The form is generated once the name is approved by the, the paper will go for further process,
2. The PDF forms are replaced with the web forms, which have to be submitted along with the DSC certificate.

D. Procedure for filling the Web Form

1. Login to the MCA website
2. Go to MCA service and SPICe
3. Select the exiting application
4. Complete the web form
5. Attach the necessary documents which have been prepared under STEP 1; each document shall be self-attested and must mention the date and place.
6. Along with the SPICe, fill the INC9 and Agile Form.
7. After completing the forms, download the state, and affix it with the DSC.
8. Submit all the 3 forms at the MCA Website, “Linked Forms”, and affix DSC and submit the requisite fees.
9. Once the SPICe and Agile Form are approved, the incorporation certificate and license number will be generated.
10. Incorporation Certificate will carry the date of Incorporation and Company Identification Number (CIN), TAN, and PAN.

Conclusion

The benefits which can be seen from the registration under Section 8 is that it starts with the least capital; requirement, it has maximum tax benefits, no need to pay stamp duty, the company has a separate legal identity like any other corporate, and the most significant advantages which the members/ donators derive is the exemption on their donation under Section 80G of Income Tax Act 1961. The credibility of Section 8 Company is way more than any other trust, charitable organization, or society.

Read our article:Regulations for Company Registered under Section 8 of Companies Act 2013